Almost 75% of workers live paycheck to paycheck, so you aren’t alone if you are struggling to keep ahead of your bills.[1] Fortunately, financial peace of mind is closer than you might imagine. To give yourself some breathing room, create a budget and reduce your discretionary spending. Pay down debts with high interest rates, such as credit cards. Increase the money coming in by getting a part-time job and claiming all of your allowable tax deductions. Once you find your footing, invest in your future by saving for emergencies and your retirement.

Steps

Part 1

Reducing Your Expenses

1

Create a budget.[2] The only way to stop living paycheck to paycheck is to get your spending under control. You’ll need to create a budget so that your income exceeds your expenses. Sit down and crunch the following numbers:

Income. What do you bring in every month? Count your paycheck, as well as any retirement benefits, unemployment benefits, disability payments, child support, etc. that your spouse brings in. Add it all up.

Fixed expenses. These are bills that cost the same amount every month: rent or mortgage, health insurance, car payment, etc. Total the amount.

Discretionary spending. This is everything else you spend money on: groceries, entertainment, etc. The amount you spend will fluctuate from month to month.

2

Cancel an unused gym membership. Ask yourself whether you are really using your gym membership.[3] If you only go a couple times a month, then you can easily cancel and find cheaper ways to stay in shape.

Go running outside in the spring or summer, or join a walking club in your neighborhood.[4]

Play tennis, basketball, or volleyball at public courts.

Check how much it costs to join a community recreation center. Typically, it is much cheaper than to join a private gym.

3

Cut your cable. More and more people are cutting the cord. Fortunately, there are alternatives to cable TV which will allow you to keep up with your favorite TV shows. Consider the following:[5]

Hulu lets you watch current shows soon after they are broadcast. Pay $8 a month.

For $20 a month, you can get Sling TV. The basic package includes more than 25 live channels, such as CNN, ESPN, and Disney.

Check out videos from your library for free.

4

Find a cheaper phone plan. You might be paying too much for your phone. Fortunately, there are new companies entering the market every year, and they offer rock bottom prices. Do some research online to see if you can find a cheaper plan.[6]

To not get locked into a phone bill you can’t afford, you should probably avoid cell phones that have contracts.

5

Learn how to do things yourself. You pay other people to do all kinds of things you can do for free. Spend a weekend learning new skills that will save you money:

Change the oil in your car.[7] Get a book like the Popular Mechanics Complete Car Care Manual and read it cover to cover.

Cut your own hair. Buy scissors or an electric razor and give yourself a new haircut.

Cook meals at home.[8] You can save money by not ordering take-out or eating at restaurants. Instead, get a cookbook and buy generic label goods.

6

Consider downsizing. You can reduce fixed expenses also, but you’ll probably have to downsize your life. For example, if you can’t afford your mortgage or rent, then you should move into a smaller place.[9] If you really need to cut expenses, consider whether you can move back home or in with friends temporarily.

Also think about selling your car if your car payment is too large. Instead, use public transportation or get an older model.

7

Pay down your debts. High interest debt (like credit card debt) is probably costing you hundreds or thousands of dollars a year in interest payments. This is money you need if you are ever to build financial freedom. Accordingly, focus on paying down your debt as quickly as possible.

If you have multiple credit cards, focus on paying off the one with the highest APR first. Pay the minimum on all cards, and apply extra amounts to the highest-interest card. Once you pay that one off, focus on the card with the next highest APR.[10]

You might also consolidate your debts using a balance transfer. Many credit cards offer an introductory 0% APR for up to 12-18 months.

8

Limit the money you spend on fun. You shouldn’t stop spending altogether on luxuries. If you do, then you will probably stop following your budget and never stop living paycheck to paycheck. Instead, allocate a certain sum of money each month and put it in an envelope. Only use this money and stop spending on luxuries when it is gone.[11]

9

Pay your bills immediately. People who live paycheck to paycheck often spend quite a bit of money on late fees. You can save money by paying your bills as soon as you receive them.[12]

Once you’ve saved an emergency fund, you can devise a monthly routine for paying bills. For example, you might get paid twice in a month. Check the due dates on your bills and divide them in half.

You might be able to get your credit card company to move the due date around a little. Call them and check.

10

Carry only one credit card. Credit cards make spending too easy. To keep yourself from spending, carry only one credit card with you for emergencies.[13] Also make sure that it is a card with a low credit limit so that you don’t rack up high charges if you do splurge.

Alternately, you could carry a secured credit card. You deposit a sum of money on the credit card and then can spend only that amount.

Part 2

Increasing Your Income

1

Get a part-time job.[14] The more money you make each month, the easier it will be. Accordingly, consider part-time work. Even working 10 hours a week at $10 an hour nets you $100 a week. Before taxes, you’ll make an additional $5,000 in a year. With that kind of money, you’ll soon stop living paycheck to paycheck and instead begin building financial freedom.

Part-time work isn’t always possible if you have young children or are a single parent. However, there are many work-from-home options, such as writing freelance articles.

2

Ask for a raise. Dedicate yourself to your job for the next six months. Show up on time and go the extra mile. At the end of the six-month period, ask your boss for a raise or a promotion.[15]

3

Sell items you don’t use. Now is the time to clean out your house and sell things you no longer use.[16] Divide objects into three piles and sell them where they are likely to get the most value:

Larger items like furniture and bookcases can be sold on Craigslist. You’ll be surprised at how many people contact you. Ask them to pay in cash and show up at your home to haul the items away.

Smaller items worth $5-10 can be sold on eBay. This category includes things like hardback books, old DVD players, and smaller electronic items.

Sell everything else in a yard sale or a garage sale. Pick a sunny day and paper the neighborhood with flyers.

4

Get child support, if necessary. Your child’s other parent is legally required to support their children, whether they want to be involved in the child’s life or not. Accordingly, you should file for child support. Contact your local child support agency. They can find a missing parent, establish paternity, and sue to get child support payments.

You can also file for child support on your own, but it’s easier if you work with the child support agency. They charge only a small fee.

5

Find government assistance. Depending on your income, you might qualify for government benefits, such as health insurance or food stamps. Investigate your options and contact the relevant government agency to check whether you qualify. Many working people qualify for help.

For example, you can qualify for Medicaid health insurance if your income is sufficiently low. Contact your state’s Department of Health and Human Services to check. Even if you don’t qualify for Medicaid, you can buy health insurance on the government health exchanges. You might qualify for help paying your premium and any out-of-pocket expenses.[17]

Some workers also qualify for food stamps. Generally, a single person will qualify if they make less than $1,287 each month in gross income, and a household with three people will qualify if they make less than $2,184.[18]

6

Take all of your tax deductions. You can save big at tax time if you know which deductions you are entitled to take. Each deduction will lower the amount you must pay in taxes. Consider the following:

Business owners who work from home can claim the home office deduction. You will qualify if you use a space in your home exclusively and regularly as your office.[19]

Business owners can also deduct business expenses, so long as they are ordinary and necessary. An expense is ordinary if it is accepted and common in your business, and an expense is necessary if it is appropriate and helpful. Necessary expenses do not have to indispensable.[20]

Part 3

Saving for Your Future

1

Build an emergency fund. Financial experts encourage people to sock away at least six months of expenses in case of emergencies. If your car breaks down or if you lose your job, this money can tide you over. If possible, build up to twelve months of savings. Visit your nearest bank or credit union and open a savings account. You can also open an online savings account.[21]

Start small. You might only have $5 a week to contribute to your emergency fund. However, at the end of the year, you’ll have $260 saved. If possible, increase the amount you save each month by cutting expenses or increasing your income.

Remember to start building your fund right away. Don’t wait until you’ve paid off all of your credit card debt. Instead, you’ll need a cash cushion right now. Contribute at least a little each pay period to your emergency fund.

2

Start saving for retirement. Once you get some breathing room, you can begin to think about the future. Everyone can begin saving for their retirement. If your employer sponsors a retirement plan, then sign up. Some employers offer to match your contributions up to a certain amount.[22]

If your employer doesn’t offer a retirement plan, then you can buy your own. Open a traditional IRA and make pre-tax contributions. This will lower your overall tax burden.

Also consider opening a Roth IRA. Although you have to pay taxes on your contributions, they will compound tax-free. When you reach age 59.5, you can withdraw without paying taxes on the income. You can also withdraw your contributions penalty-free (and tax-free) if you face a sudden cash crunch.[23]

3

Handle sudden windfalls wisely. At some point, you might get an unexpected raise or a tax refund. In these situations, you need to avoid blowing all of the money on a trip to Vegas. Instead, do the following:

Splurge no more than 10% on something fun. If you get a $2,000 rebate check, limit your spending to $200.[24]

Use some of the money (30-40%) to increase your emergency fund if you don’t yet have 12 months of expenses saved.

Also funnel about 50% of the money to pay off debts. If your debts have all been paid off, then invest it in your retirement.

If you want to stop living paycheck to paycheck, start by making a budget and getting rid of unnecessary expenses. First, write down your income and your expenses, like rent, car payments, and groceries. If your expenses are close to the amount you earn, try getting rid of unnecessary things, like your gym membership or cable subscription. You can also try limiting luxuries, like shopping or going out to eat. Try putting a set amount of money for fun activities in an envelope and stop spending on luxuries when it’s gone! To learn how to build an emergency fund, scroll down.

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This article was co-authored by our trained team of editors and researchers who validated it for accuracy and comprehensiveness. Together, they cited information from 24 references.